An Agenda for American Political Economy

Rather than respond directly to Larry Bartels’ response to my comments on (one part of) his book, I’d like to say something about what I see as the agenda for American political economy, and about Unequal Democracy’s contribution to this agenda.

In my view of American political economy, the outcome of interest is the well-being of the American population, with an emphasis on the lower two thirds and particularly the bottom third.

I think there are two main questions that need answering:

1. What constitutes “well-being”? Some candidates: income, assets, consumption, employment, economic security, safety, health, opportunity, capabilities, liberty, mobility, life satisfaction. To what extent are there tradeoffs? Should we prioritize level or improvement? Relative well-being (equality) or absolute? How much weight should be given to people in other countries? To future generations of Americans?

2. What contributes to success in achieving this outcome? What are the causal paths? Which causes have the biggest impact? Here’s a partial list of possible contributors:

Aggregate economic performance: GDP per capita, employment rate

Distribution of economic performance

Innovation, technological change

Human capital

Government policy: macroeconomic

Government policy: tax

Government policy: social

Government policy: education

Government policy: regulatory

Government policy: labor

Government policy: trade

Government policy: industrial

Government policy: foreign/military

Partisan control of government: president

Partisan control of government: Congress

Ideological orientation of judiciary

Election campaign financing

Election campaign tactics

Political messaging

Policy preferences: bottom third

Policy preferences: median

Policy preferences: elite

Vote choice: bottom third

Vote choice: middle

Knowledge about policies and politics: bottom third

Interest group organization: business

Interest group organization: labor

Social movement size and organization: left

Social movement size and organization: right

Participation in civic associations

Trust

Product markets: size

Product markets: degree of competition

Corporate governance practices

Management-labor relations within firms

Cooperation among firms

International bond markets

Attractiveness of production sites abroad (labor cost, skills, political stability)

Trade-industrial-currency policy of other major economies

Immigration

Household-family composition

Household employment patterns

There are many, many hypotheses and empirical studies that bear on this second question of what matters and how. In Unequal Democracy, Bartels finds the following:

Democratic control of the presidency has contributed to growth-oriented macroeconomic policy and redistributive social policy, producing faster income growth for households in the bottom 80% of the income distribution.

Low-income Americans often have limited knowledge about policy and politics.

Senators’ voting has corresponded far more closely to the preferences of the affluent than to the preferences of the bottom third.

For me, two things stand out about Unequal Democracy’s contribution to American political economy. One is that so many interesting and relevant hypotheses are advanced and tested, in a sophisticated and nuanced way, in a single book. I read (and reread) the book with a mixture of appreciation, awe, and envy.

The other is that the book looks directly at (one measure of) the outcome of interest: the well-being of the middle class and the poor. Jacob Hacker and Paul Pierson rightly point out that if our concern is income inequality, Bartels’ data miss the separation that’s been occurring between the top 1% and everyone else. Yet Bartels’ finding that income growth for the bottom four fifths has tended to be much faster under Democratic presidents than Republican ones is striking and important.

Will Wilkinson asks an interesting question: If lower-income persons tend to be misinformed about what party and/or policies will best advance their well-being, is it a bad thing that Congress is less responsive to their preferences than to the preferences of people with higher incomes? I doubt it’s systematically the case that the well-off favor policies more helpful to the poor than those favored by the poor themselves. Still, in a representative democracy in which elections are reasonably open and fair, I don’t have a problem with policy makers ignoring undesirable or ineffective policy preferences held by the poor.

Like any great book, Unequal Democracy advances our understanding of important issues but by no means represents the final word. Key unresolved questions include:

To what degree do Democratic presidents and/or Congresses do a better job at advancing the well-being of the bottom two thirds? On the one hand, the partisan effect of presidents on income growth appears to have weakened considerably since the 1970s (see figures 3 and 10 here). On the other hand, the recent battle over health-care reform is just one more example, on top of those examined in Unequal Democracy, of how party control seems clearly to make a difference.

What policies matter?

Why don’t more low-income whites vote what appears to be their economic self-interest? (This is the question I addressed in my contribution to this roundtable.)

What effects does rising economic inequality have on democracy and policy?

2 Responses to An Agenda for American Political Economy

Re: Wilkinson comment
“is it a bad thing that Congress is less responsive to (the preferences of people with low incomes) than to the preferences of people with higher incomes?”

To me the beauty of democracy is that the people who suffer from decisions are allowed to participate in the decision making process. By getting buy-in the government gains trust. I’d like to see analysis that shows how people with more to lose in any given election vote. For example in the upcoming elections I imagine SSI recipients will have more skin in the game than the average 18 yr old. To me the low/high income axis seems less relevant than the low/high motivation axis.

Which group benefits the most seems like a distraction. Should not the emphasis be on the economy as a whole? Should we not at least, for the sake of comparison, a number of what policies do better for the National economy as a whole, regardless of who benefits? I understand the importance of the study, but I would think context is important.

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